William Hill Plc, Re Companies Act 2006

The court considered an application for sanction of a transfer scheme of arrangement under Part 26 of the Companies Act 2006. The principal issue was whether the explanatory materials and the conduct of the scheme meeting provided sufficiently full and accurate information to enable scheme shareholders to make an informed decision, in particular in relation to a joint venture "Restricted Acquirers" provision (the so-called "poison pill") which could permit Caesars to add or substitute names and thereby trigger termination rights. The court reviewed jurisdiction (s.895), compliance with convening requirements and the statutory conditions, the constitution and representativeness of the meeting, voting majorities obtained, and whether the outcome could properly be relied upon.

The court found that the statutory conditions had been satisfied, the convened hybrid meeting complied with the convening order and the Practice Statement, and the required majorities were obtained. The court considered detailed arguments from HBK and other objectors that derivative holders and purchasers of economic interests had not been given sufficient detail of the mechanics and six‑month timing limitation of the Restricted Acquirers provision, and that this rendered the vote unreliable. Applying established authorities (including s.897 and the Practice Statement), the court held that the Explanatory Statement disclosed the existence and commercial effect of the termination right and contained sufficient information for an ordinary class member to make an informed decision. The court concluded that any deficiency was not of such materiality as to have caused ordinary shareholders to change their votes, that there was no evidence that class members were actually misled, and that the objections originated largely from holders of derivative interests rather than registered shareholders. For these reasons the court sanctioned the scheme.

The Company applied for the court's sanction of a transfer scheme of arrangement under Part 26 of the Companies Act 2006 to implement Caesars' recommended cash acquisition of William Hill at 272p per share. The convening hearing had previously authorised a hybrid meeting. The sanction hearing addressed a number of routine matters (jurisdiction under s.895, compliance with statutory conditions and with the convening order, class constitution, voting majorities and representativeness) and a central contested issue concerning the adequacy of disclosure in the Scheme Document about a joint venture provision giving Caesars a right to maintain and update a list of "Restricted Acquirers" and thereby to trigger termination rights affecting the Company's US joint venture.

Nature of the application: sanction of a scheme of arrangement under Part 26 of the Companies Act 2006.

Issues framed:

• Whether the court had jurisdiction and whether statutory conditions and convening directions had been satisfied;
• Whether the meeting was properly constituted and representative and whether the requisite majorities had been obtained;
• Whether the Explanatory Statement and Scheme Document fairly and adequately disclosed the effect and mechanics of the Restricted Acquirers provision (including the scope and timing of the six‑month update right) such that the outcome of the meeting could be relied upon;
• Whether the scheme was one that an ordinary class member could properly accept and whether any "blot" prevented sanction.

Court's reasoning: The court applied the statutory requirement in s.897 and the Practice Statement that scheme explanatory material be concise but contain such information as is reasonably necessary for an informed decision and the authorities requiring full and accurate disclosure of main facts. The Scheme Document disclosed the existence and commercial effect of the joint venture termination right and, although it did not recite the precise contractual mechanics, the court held that disclosure was sufficient for the purposes of ordinary class members deciding whether to exit the Company at the offered price. The court gave careful weight to objections raised primarily by holders of derivative economic interests who purchased after the bid announcement and who argued that more granular detail (in particular the six‑month update limitation) was material to their speculative strategies. The judge concluded that any omission was not of sufficient materiality to have caused ordinary shareholders to change their votes, there was no evidence that registered scheme shareholders were misled, the meeting turnout was representative, and the required majorities were obtained. The court also noted it should be cautious about allowing non‑shareholder economic interest holders to overturn the expressed will of the statutory majority. The scheme therefore was sanctioned.

Procedural posture: first instance Companies Court sanction hearing; the convening order and procedural matters were considered and found in order.

The judge observed the wider context and cautioned that the court will be slow to depart from a properly conducted statutory majority absent material deficiency; he sanctioned the scheme and indicated the usual acquirer undertaking would be required.

This was a first instance sanction hearing. The court sanctioned the scheme of arrangement. Rationale: the statutory conditions and convening order were satisfied; the meeting was properly constituted and representative; the Scheme Document, while not reciting every contractual detail of the joint venture "Restricted Acquirers" provision, fairly disclosed its existence and commercial effect in accordance with s.897 and the Practice Statement; any omission was not sufficiently material to have caused ordinary class members to change their votes; there was no evidence that registered shareholders were misled; and objections were largely advanced by holders of derivative economic interests rather than by registered shareholders.